Political tumult has dealt a blow to Egypt's once-buoyant economy, but some of the region's largest buyout firms are still investing there - albeit with serious concerns about the country's political climate and the value of its currency.
Egypt had been a darling of private-equity players before the revolution, thanks to its economic links to Europe, its growing middle class and its status as the Arab world's largest country, with a population of about 80 million. Its economy grew by 5.1 percent last year and by 4.7 percent in 2009, according to IMF figures.
The revolution caused many companies to put the brakes on scores of deals then under negotiation. It also dampened economic growth, which is estimated at 1.2 percent this year. But the fundamental attractions remain, said Ahmed Badreldin, a senior partner at Dubai's Abraaj Capital, the largest private-equity company in the Middle East.
"You have a growing population, you have a growing middle class, you have a low-cost labour, you have low-cost energy, you have cheap freight to Europe, so in a way the macro story is fine," said Mr Badreldin, who oversees his company's investments in Egypt. "I think the risks which one year ago weren't so much at the top of mind versus other business risks are related more to the currency and the political situation. We are in a transition currently in Egypt, but we just don't know in a transition to what. If there's more clarity around where this transition is taking us, I think that would give more comfort."
Abraaj has three major investments in Egypt: in Orascom Construction Industries, a big engineering and construction outfit; Spinney's, a regional supermarket chain; and Al Borg Lab, one of the region's largest private medical laboratories.
After the revolution, Al Borg acquired smaller competitors in Egypt and expanded in Sudan and Jordan, Mr Badreldin said. It has also increased the size of its staff, taking advantage of other companies' problems by poaching their best people.
"You can now get good skill sets into the business that you couldn't get before because they were holding out for more pay," he said. "Also it's a good time if you need to implement a change-management strategy. It's a good time to do it, when the rest of the country is also changing. So in a way we've used it largely to our advantage."
Yet investing in Egypt also comes with challenges that political turmoil has only exacerbated. About 700,000 young people will have entered the job market this year, said Angus Blair, the head of Corporate Strategy and Client Development at Beltone Financial, an Egyptian investment bank. Strong economic growth is needed to create jobs for them and ensure political stability.
"We're building up pressure in the system, and I think in the end, no matter who's going to be in charge, it's all going to be about jobs," he said, citing high inflation and poor business sentiment as other worries.
One of the biggest concerns for foreign investors is the status of the Egyptian pound. If instability and economic stagnation weaken the currency against the dollar, the dollar value of companies' profits - and the dollar-value of investors' returns - also weakens. The pound trades at about 6 to the dollar, but Mr Blair said it could easily go higher.
"I would say that we could reach higher than that to easily 6.5 or perhaps even 7 if there are shocks to the system," he said. Sherif Elkholy, a director with Actis, a private-equity company that invests in Africa, Asia and Latin America, said the key was to keep close watch over investments to guide them during the period of uncertainty.
"I think we do need to be a bit closer to portfolio companies and [use] more hands-on portfolio management techniques," he said. "But broadly speaking, if you pick the sector correctly and you agreed a good price, I think you should probably be sitting on quality businesses that are continuing to keep going in a healthy manner despite the current difficult environment."